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The economic and behavioural game should be matched => are they follow the economics or where they come from? Both companies went bankrupt > does not make sense to have 2 radio providers => merger But, they competed with a lot of players (free players > no money coming in) -iTunes -Spotify Revenue growth has been quite impressive in terms of their customers (SiriusXM): it comes from automotive sector (70% of the cars has satellite radio => growth in line with automotives). They made huge investments => what is the enterprise value(not EBITDA margins, which are very high). Stock market (Nasdaq): how much did we put in the beginning and how much do we have now? They are not there yet! Did not compensate their investments in terms of the enterprise value: strategy is not about the EBITDA but enterprise value (what you are doing over time. It tells you more about the story). Elements of connectivity : game theory & competitor profiling Goals refer to whatplayers maximize => market share? Profitability? Difficult to compete if players have different goals (objectives are different: but you can still use game theory but you need to put the right objectives in there) Beliefs are weightsplayers put on outcomes or actions (technology, advertising, content,… : columns, rows in the game) Routines imply constraintson or opportunities for the players’ maximization problem (content, technology = Sirius, XM) Competitor profiling leads to the analysis of best responses Game theory leads to the analysis of equilibrium; all players using their best responses Advice: first think about the best response and then you better check the Nash equilibrium Predicting your competitor’s reactionsWill the competitor react at all? oWill you rival see your actions? oWill the competitor feel threatened? oWill mounting a response be a priority? oCan your rival overcome organizational inertia? Verspreiden niet toegestaan | Gedownload door Lindsey VL ([email protected])lOMoARcPSD
o17% make no response What options will the competitor actively consider? o75% looks at 2 or 3 options o55% considered the most obvious option (me-too reaction) Which option will the competitor most likely choose? oHow many moves ahead does your competitor look? 25% models no reaction beyond own move oWhat metric does the competitor use? 15% use NPV on options 17% short term market shares 17% short term earnings 21% long term earnings (2 years) Very few companies really think strategically/competitive dynamics. What is it, what metric are you using? Long term, short term, enterprise value, market share,…Few firms think about enterprise value on long term. Handling Competitive Dynamics Think best response rather than equilibrium! Eliminate unlikely actions (what are they likely to do and what not?) Look for robuststrategies and responses (if your competitor is not super-rational, look for something that actually works under different assumptions on how your competitors are going to respond Leverage different constraints: o